Disclosure of Reference Documents for Soliciting Proxy Votes by Minority Shareholder

Greetings, shareholders.

I am aware that you are all experiencing much hardship and difficulties due to the prolonged Covid-19 crisis.I sincerely hope you will overcome this difficult period and wish for the health and well-being of your families.

On August 30, 2021, Mr. Jong-Guk Song, a minority shareholder, publicly disclosed reference documents soliciting proxy votes with respect to the general meeting of shareholders (the “GMS”) of Sajo Industries Co., Ltd. (the “Company”) scheduled for September 14, 2021.

The Company is always appreciative of your interest in increasing our corporate value and improving shareholder value.We recognize the importance of promoting the interests of our shareholders as a whole including minority shareholders such as Mr. Song, as well as how vital constructive and smooth communications are to such end.We are constantly striving to actively respond to sound inquiries and suggestions from the shareholders.

The above disclosure soliciting proxy votes must comply with (i) Articles 152 through 158 of the Financial Investment Services and Capital Markets Act (the “FSCMA”), (ii) Articles 160 through 166 of the Enforcement Decree of the FSCMA, (iii) Article 3-15 of the Regulations on Issuance and Disclosure of Securities notified by the Financial Services Commission (the “FSC”), and (iv) the below provision on stating the purpose of soliciting proxy votes in forms comprising the reference documents soliciting proxy votes, under the forms attached to the Financial Supervisory Service’s (the “FSS”) Standards for Preparing Corporate Disclosure Forms.

However, it is the Company’s determination that the purpose of soliciting proxy votes stated in Mr. Song’s disclosure of reference documents soliciting proxy votes in this case violated the above provision, as it exceeded 1,000 characters.In addition, the purpose of solicitation sets forth either factually incorrect or legally invalid allegations.Positions on some agenda items presented to the GMS are completely inconsistent with the facts, and the arguments presented in connection with the eligibility of the candidates for non-standing directors and outside directors are untrue. As such, the Company would like to explain our position on these allegations as set out below, to prevent any misunderstanding or confusion by the shareholders.

1.Allegations Contrary to Objective and Definite Facts

Mr. Song presents allegations in the said disclosure that are contrary to the objective and definite facts to make groundless and speculative allegations that the Company’s profit may have increased by at least KRW 5 billion and potentially more than KRW 15 billion, in the absence of the circumstances set forth below.

(1)Allegation that the share price remained below the offering price until only one year ago and that there has been no returns to the shareholders, due to stingy payment of dividends, etc.

-Since the Company’s share price as of August 31, 2020 was KRW 31,800 based on the closing price, Mr. Song’s claim that the share price was below the offering price until only one year ago is not true.Furthermore, while the KOSPI composite index which was at 2,326.17 points as of August 31, 2020 increased by 37.53% to 3,199.27 points as of August 31, 2021, the Company’s share price increased by 89.62% to KRW 60,300, showing a high rate of share price increase.

-In addition, the Company continued to pay dividends in all of the last five business years.In 2020, the Company paid out cash dividends in the amount of KRW 200 per common share, which increased the dividend volume by 33% compared to the previous year.

In sum, the argument by Mr. Song that the share price remained below the offering price and that there has been no returns to the shareholders is untrue.

(2)Allegation that Sajo Systems Co. Ltd. (“Sajo Systems”), a company headed by a son of the Company’s CEO and primarily engaging in real estate rental and management business, was subjected to the Korea Fair Trade Commission’s (the “KFTC”) sanctions in 2018 due to wealth-funneling involving tens of billions of won, and that intercompany transactions amounted to 90%.

-The main business of Sajo Systems is computer services, etc., not real estate rental and management.The Company has never been sanctioned by the KFTC for wealth-funneling involving tens of billions of won, and intercompany transactions between Sajo Industries and Sajo Systems as of the end of 2020 amounted to approximately KRW 1.6 billion only. Furthermore, as the annual intercompany transactions ratio in 2020 was approximately 18%, Mr. Song’s claim that intercompany transactions amounted to 90% is also completely untrue.

(3)Allegations concerning Castlex Seoul and Sajo Vanuatu

-The claim that the Company merged Castlex Seoul and Castlex Qingdao to cause Castlex Seoul to assume Castlex Quingdao’s Quingdao Golf Course related liabilities of approximately KRW 24 billion is completely untrue. Such liabilities cannot be confirmed at all in the financial statements of Castlex Qingdao as of the end of 2014. Mr. Song’s argument has no basis and is inconsistent with the facts in any way.

-The allegation that the Company merged Castlex Seoul and Castlex Jeju in an attempt to acquire a 24% stake in Castlex Seoul is also completely unfounded and inconsistent with the facts.

-Moreover, the claim that an overseas entity, Sajo Vanuatu, was newly established for the purpose of intercompany transactions following the suspension of wealth-funneling due to the KFTC’s sanctions in 2018 is also untrue, and the incorporation of Sajo Vanuatu had nothing to do with the KFTC’s sanctions.

2.Allegations Concerning Agenda Items of Soliciting Exercise of Voting Rights by Proxy

(1)Item 2:Method of voting for appointment of directors who also serve as audit committee members

As the Company stated in the notice on convening the GMS dated August 30, 2021, the question of whether to elect a candidate such as Mr. Song – who is eligible to become both an outside director and a non-standing director – as an outside director or a non-standing director, is a matter to be decided by the consensus of the shareholders at the GMS.

Applicability of the provision on aggregation of specially-related parties under Article 542-12(4) of the Commercial Code when applying the 3% limit on voting rights with respect to the agenda item of electing the director or audit committee member in question depends on whether the candidate is elected as a non-standing director or outside director.Since this will affect the resolution of the GMS, this should be decided according to the consensus of all shareholders, not by some minority shareholders only.

Furthermore, considering that the order of agenda or voting method can be decided by a resolution of the GMS in the event of any disagreement thereto among the shareholders, the Company is proposing the agenda item to determine that the position of an audit committee member to be elected through a separate election would be an outside director (not a non-standing director), and present the candidates recommended by the shareholder-proposer and by the board of directors as a single package, as an agenda item preceding the separate election of a director as an audit committee member, so that the decision thereon would be based on the consensus of the shareholders.

The foregoing is an issue arising in the interpretation and application of Article 542-12 of the Commercial Code on the restriction of voting rights due to the separate election of audit committee members.There are precedents where other companies have dealt with the issue in the same way, and we have referred to such precedents. (See notice convening the shareholder’s meeting of Eusu Holdings Co., Ltd. disclosed on March 21, 2021.)

In the end, Mr. Song’s claim that the Company presented such agenda items to avoid the 3% limit on voting rights in aggregation of specially-related parties is completely untrue.Further, the fact that Mr. Song, who claims to be independent from the controlling shareholders and insists on checking and monitoring the controlling shareholders, is attempting to become a candidate for a non-standing director rather than an outside director, is against the fundamental nature of the system of outside directors, and this may even be deemed an abuse of the system of a 3% limit on voting rights in aggregation of specially-related parties.

Therefore, in order to faithfully fulfill its responsibilities for fair and lawful proceedings of the GMS, the Company seeks to clarify this point through a resolution of the GMS.

(2)Agenda item 8: Matter of resolution on acquisition of treasury stock

Mr. Song alleges that the Company must purchase and cancel treasury stocks, as the Company has more than KRW 338 billion in distributable profits.

However, it appears the distributable profits were calculated incorrectly.Specifically, it appears that the amount claimed by Mr. Song was excessively overestimated by KRW 100 billion or more compared to the amount calculated in accordance with the law.

Furthermore, even if it is possible for the Company to acquire a certain amount of treasury stocks with the existing profits available for dividends, we cannot use our cash for large-scale treasury stock acquisition, etc. without a full review of our operating and financial situation, cash flow and liquidity needs, etc.The Company has established a comprehensive policy on shareholder returns in consideration of our financial situation and management, as well as investment-related needs of funds, etc.Any acquisition of a significant amount of treasury stocks that does not take this into consideration may worsen our liquidity and financial situation.

3.Allegation that the Company made excessive demands for documentation regarding the eligibility of candidates

The Company requested Mr. Song and the minority shareholders to provide the candidates’ certificates of work experience and evidentiary materials to verify the disclosure requirements, such as the eligibility of candidates etc.However, the above shareholders did not submit certificates of work experience and evidentiary materials for many candidates, only submitting confirmation letters in their own name, which are difficult to verify.Due to insufficient documentation, the Company requested the minority shareholders for supplementation.

Eligibility and work experience of candidates for executive positions are the most important matters at the GMS to elect officers, which are disclosed in the Company’s name and included in the notice and disclosure on the convening of the GMS.In this regard, our board of directors must faithfully check the accuracy thereof by exercising its duty of care and fiduciary duty.In addition, there are simple ways to verify these evidentiary documents, such as certificates of qualification and certificates of work experience for each workplace, and it is common for these documents to be reviewed in the course of convening the GMS.Moreover, since all members of the audit committee must be replaced through this GMS according to the minority shareholders’ request, the Company must also verify whether the candidates have appropriate qualifications and expertise by checking the eligibility and experience requirements for accounting and financial experts under Article 37(2) of the Enforcement Decree of the Commercial Code, in addition to the general requirements for disqualification of candidates applied to outside directors, etc. and the disclosure requirements such as dispositions for tax arrears, etc.This is critical for ensuring the legitimacy of the composition of our audit committee.Accordingly, the Company requested the minority shareholders to provide documents to prove their work experience and qualifications, since the certificates of work experience in the form of confirmation letters issued in their name were insufficient.

As it is not objectively difficult to submit such certificates of work experience, we do not think the Company’s request for the submission thereof is unreasonable. The Company is also conducting the same level of verification for candidates recommended by the board of directors.

In the end, some candidates of the minority shareholders failed to properly submit certificates on details of their work experience in spite of the legitimate requests described above.Please note, however, that the Company respected the minority shareholders’ requests and upon receiving confirmation letters from individual candidates stating that there was no falsehood regarding the facts concerning their work experience with respect to some unverified details of their work experience, we finally proposed the agenda item of holding an election on the candidates and proceeded with the resolution and disclosure on the convening of the GMS.

Chang-Joo Lee, Representative Director

Sajo Industries Co., Ltd.